How has Digital Transformation impacted Accounting?

“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.” 

— George Westerman

 

Digital Technology has the power to impact the strategies and competitiveness of businesses in the market. It is ever evolving and creating a revolutionary stand for different professions as well.

 

Accounting is considered to be one of the oldest and traditional professions. The rules and methodology of this profession has remained uniform for a long period of time. But due to the advent of the digital technology accounting industry is experiencing some great changes.

 

In this blog we will talk about all such changes and discover how Digital Technology has impacted the accounting profession.

 

Also Read | 8 Ways to Build Digital Transformation Strategies

 

Digital Technology and Accounting

 

There are three main reasons why professions change. One is Competition, second is Globalization and the third one is Digitization or Technological Advancements. If we go back to the time when accounting was done without any technology then we can see how much effort, brains and man-power was needed. 

 

Because of increasing demand businesses grew larger and accounting was an inseparable function which had to be done irrespective of the size. Gradually it was difficult to manage the accounting of large firms without having any machine help. This profession faced a lot of challenges and required the need to adapt technology.

 

The main problem was that accounting had to be done by following uniform rules and methods and it became a challenge to adapt technology and keep the basic principles as well.

 

From an accountant's perspective we can imagine the relief that Digital Transformation will provide. It will help accountants to use their insights and skills to interpret the system generated data better. Better Financial Planning and financial reporting can be done.

 

Accounting has become one of the most affected professions from technology and digitization. Due to digital transformation following changes were observed:

 

• Tasks and activities of Accountants are changing.

 

• The expectations of clients are increasing and becoming more specific.

 

• Reduction of work pressure and workload of employees.

 

• Repetitive Tasks are done more easily and comfortably with more efficiency.

 

Also Read | Digital Transformation Trends

 

Aspects of Digital Transformation affecting Accounting Systems

 

There are different aspects of Digital Transformation which have affected the accounting systems in a positive way. These aspects have increased the transparency of systems, reduced the costs, saved time and efforts of personnel. 

 

They have also contributed in data protection, integration, improving data quality and increasing the efficiency of accounting systems as a whole. Given below are those aspects:

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Aspects of Digital Transformation affecting Accounting Systems

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1. Blockchain Technology

 

In Blockchain there is a group of devices (nodes) and each of the devices represents a database (ledger). All the transactions that occur are verified and confirmed through this database. Using this technology we can develop a transparent Accounting Information System. In accounts we follow a double entry system. 

 

With Blockchain Technology we can develop a triple entry system which is much faster because of automation. This Information System will assist accountants to work quickly and simultaneously removing the errors and mistakes. There will be a better integration between the accounts and ledgers of suppliers, dealers and other chains.

 

 

2. Cloud Computing

 

Cloud Computing is a whole new concept which in itself is a whole Digital Transformation System. It is not merely a solution for data storage but a revolution that can improve accounting. Cloud Computing helps to save time, money, and improves speed and accountability. 

 

It also helps in scalability and transparency. With the help of Cloud Computing we can ensure that data services are connected and run every time through the internet. It offers a huge infrastructure for scaling.

 

 

3. Big Data

 

Big Data is a set of huge volumes of complex data that cannot be run through traditional systems or softwares. We can use Big Data in Accounting as it helps to analyze huge volumes of data.

 

Like the data of Financial Markets and Media. We can identify the target audience by analyzing such vast data and run better sales and marketing campaigns.

 

Also Read | Financial Institutions

 

 

Surveys and Facts on Digital Transformation in Accounting

 

Below are some surveys conducted by PWC and KPMG which revealed how Digital Transformation was incorporated in Accounting.

 

1. Survey conducted by PWC in 2018

 

In 2018 PWC conducted a survey on German based middle sized companies. It took around 76 companies to understand their digital development status. The main aim was to check how and where companies used AI. 

 

• The results were: 39% of them used AI for invoicing and documenting, 29% used AI for transfer payments and 10% used AI for monitoring the documenting and consistency of documents. All these functions are a part of accounting.

 

Another question they focused on was the use of technology. They checked which companies used the latest AI systems for accounting. 

 

• The results were: 22% of the companies were going to adopt AI for Document Recognition, 20% of the companies will use AI to share their data directly with the customers and suppliers, 19% of them will adopt AI for transfer payments and 14% of the companies will use alternative of Excel sheets for documenting.

 

 

2. Survey conducted by KPMG in 2017

 

The survey conducted by KPMG was to figure out whether companies will adopt Digitization in Accounting or not. The results were coincidentally quite similar to the survey done by PWC. Companies will opt for paperless accounting, consistency in systems, data integration, data consolidation and quality of data.

 

The results of both these surveys revealed that implementation of digital systems and softwares is a costly process. It requires expertise and skills of personnel if such systems are used for internal integrations. 

 

Also Read | Big 4 Audit Firms: KPMG, Deloitte, EY & PWC

 

Companies saw this as an opportunity to enhance their performance and were ready to invest. Most of these include big companies that had the funds. 

 

Digital Transformation has impacted not only Accounting but the overall profession of Accountants as well. It has made processes easier, reduced workload and improved the performance of employees.